Bold Climate Policy Is Coming. Investors, Take Note.

Bold Climate Policy Is Coming. Investors, Take Note.

A group of global investors foresees bold policy action on climate by the mid-2020s. What will such action, dubbed the Inevitable Policy Response, mean for capital markets and economies?

Principles for Responsible Investment, a London-based organization focused on socially responsible investment, has introduced a dramatic vision of a global response to climate change. PRI, which is supported by the United Nations and a consortium of global investors, believes that by the middle of the next decade national governments will be compelled to take major policy actions to address climate change.

The shift, which PRI calls the Inevitable Policy Response, will fundamentally reorient the global economy and drive investment away from industries that are dependent on fossil fuels, and toward less carbon intensive activities. The policy shift will come quickly, disrupting financial markets, and overriding the assumption that industry and economies will have time to gradually adapt to the pricing of climate risks.

Nathan Fabian is chief responsible investment officer with Principles for Responsible Investment in London, UK. His work focuses on sustainable financial markets and the expected economic impacts of an Inevitable Policy Response.